NOLITA, Manhattan (PIX11) - When something intended to be helpful ends up being overused or abused, it’s called adverse selection in professional parlance. The way in which a couple has used New York City’s rent stabilization program gives adverse selection a whole new meaning, according to their landlord, and that meaning is unbelievably negative. The couple is accused of using their rent stabilized apartment as a hotel room or bed and breakfast, and reaping six-figure, untaxed profits as a result.

“I think this is for her a business,” said Ken Podziba, referring to his tenant, Amy Parness. Podziba, along with his sister, Susan, own 250 Elizabeth Street, an eight-apartment rental building. It’s nestled among designer boutiques where shopping is by appointment only, and very hip cafes and restaurants in one of the city’s hottest neighborhoods. It’s an ideal location for a widely sought-after bed and breakfast.

The problem is, according to Podziba, Parness has been running the b-and-b out of his apartment, which she’s supposed to be renting at a rate intended to promote affordable housing. “And she’s not paying the IRS,” Podziba told PIX11 News, “so she’s profiting 100 percent.”

For the last 12 years, Podziba said, Parness has rented an apartment on the third floor of his building. For at least the last four years of that period, she has listed the apartment as the NoLita Nest on airbanb and other bed and breakfast listing websites.

Online, the apartment is displayed as a home away from home for tourists, who pay anywhere from $220 to $260 or more per night for the one bedroom, one bath railroad apartment.

The landlords were able to confirm their suspicions about their tenant’s activities when they learned that Parness was having unlicensed contracting work done to the apartment. A climb up the stairs to the floor where she’s renting reveals a notable absence on one of the walls. Where an entry doorway had been for over a century, there is now only a wall, and at the other end of the third floor landing, where there had once been only a wall, there’s now a deep green wooden door. The door contrasts sharply with all of the black, metal fire code-compliant doors in the five-storey walkup.

PIX11 News knocked on the green, wooden door, and a woman answered, without opening. Her description of herself was consistent with that provided by Podziba. Her boyfriend is renting the apartment for the summer, she said.

They’re paying $4000 per month, according to the landlord. Parness is renting from him for $1400 per month. So when the apartment is not being used as a bed and breakfast apartment, Parness is renting it out at a nearly 300 percent profit.

“This is a business for her,” Podziba said.

He has surveillance video which shows that Parness and her husband, Ariel Churi, had workers illegally install a washing machine. They also had workers fully re-wire the apartment without permits. “We’re afraid the place will blow up,” Podziba told PIX11 News.

All of his and his sister’s allegations are detailed in a lawsuit Podziba has now filed against Parness and Churi. The suit claims that the couple not only used her rent stabilized apartment as a bed and breakfast, but they also used two other rent stabilized apartments as homey hotel rooms, amassing more than a half million dollars in the the process of their four-year scheme.

That dollar amount equals what the Podziba Family is seeking in damages from Parness and Churi.

“We don’t want to profit from her ill gotten gains,” said Ken Podziba, who is also the president of Bike New York, the organization that organizes the city’s annual five-borough bike tour. He’s also the former New York City sports commissioner. “We’ll give… all [the cash damages] to New York City-based charities” if they win the case, Podziba said.

He was able to gain the strongest evidence against Parness and Churi after he hired a private detective to stay in the apartment at the requested bed and breakfast rate of $220 per night, for three nights. As he pointed out, he had to pay someone to pay Parness to stay in his own apartment.

“The chutzpah!” Podziba exclaimed, using the Yiddish word for audacity to describe the lengths to which he said Parness and her husband made him go to expose their scheme.

As for the accused couple, PIX11 News encountered them outside of the building Tuesday afternoon, not having seen photos of the two. They both denied that they were the couple accused of using somebody else’s property to make big profits for themselves. PIX11 News was able later to easily confirm, after seeing the couple’s photos, that they were the people who had been confronted earlier.

PIX11 also called Parness and Churi at the home in New Jersey where sources say the couple actually lives. There was no reply.